Lok Sabha Passes Banking Laws (Amendment) Bill: Key Changes Explained

The Banking Laws (Amendment) Bill, 2024 was introduced in the Lok Sabha to facilitate amendments in banking laws and to improve banking governance while creating convenience for customers. Of all the changes, the most dramatic is the allowance of multiple nominee provisions in accounts such as banks to ease the transfer of assets upon an individual’s death.

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What Changes Does The Bill Propose Regarding Nominations?

The amendment also covers the appointment of up to four nominees by account holders in the account held by the members. To understand it better, read the following points:-

• Multiple Nominees: Account holders can now nominate up to four individuals who are either successive or concurrent with holding the nominated bank accounts.

• Ensuring Smooth Inheritance: This change is also intended to stop the deposit in the banks from forming part of the unclaimed funds after the death of the account holder.

• Safe-Custody Articles: For items in safe custody or lockers, the successive nomination system will apply only accepting nominations that would come one after the other to avoid complications.

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How Will This Benefit Bank Customers?

The alteration put forward is intended to enhance customer satisfaction as well as the peculiarities of the inheritance processes. To understand it better, read the following points:-

1. Succession Planning: This in the case of up to four nominees makes the process of inheritance easier. If the first nominee is not available then the second one comes into operation on an automatic basis.

2. More Control: Customers will have more control over their estate; this means less time will be spent when customers want to access their deposits after posthumous.

What Other Key Amendments Are Included In The Bill?

In addition to the nomination provision, the bill also has other proposals for the regulation of improved banking practices. To understand it better, read the following points:-

Improved Governance

• These improvements give better depositor and investor protection, making governance in Indian banks stronger through the passage of the Bill.

Regulatory Updates

• It changes the reporting frequency for banks to the Reserve Bank of India (RBI), making reporting more standardised.

Audit Quality

• They accused the government of diluting the efficacy of the Bill in revamping the audit mechanism, especially in public sector banks.

Directors’ Tenure

• It extends the term of directors in cooperative banks from 8 years to 10 years.

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How Will This Bill Impact Cooperative Banks?

Such changes are introduced about the structure and regulation of cooperative banks, and these changes are incorporated in the Bill. To understand it better, read the following points:-

• Director Tenure: The new Term of Directors in Cooperative Banks except for the chairman and full-time directors is 10 years.

• Cross-Cooperative Bank Directorship: The amendment provides a provision on the ability of a director from a central cooperative bank to also join the board of a state cooperative bank.

What Other Amendments Are Included In The Bill?

The Bill has also included changes which sought to enhance ways of dealing with unclaimed dividends, shares, or funds. To understand it better, read the following points:-

• Unclaimed Funds: Amounts of Dividends which have not been claimed by shareholders and other unmatured instruments of similar nature will be transferred to the Investor Education and Protection Fund (IEPF) from where such refunds can be claimed.

• Auditor Remuneration: All the public sector banks will be permitted to decide the amount to be paid to the auditors on their own.

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Conclusion

The Banking Laws (Amendment) Bill, 2024, contains several significant provisions to improve its effectiveness and to update the procedures of banking. Subject to the provision for multiple nominees in bank accounts, this change will ease the process of inheriting and minimise complexity. These amendments are a result of the government's core agenda of transforming the banking sector and offering better services to the public.

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